Richard Duncan: The Real Risk Of A Coming Multi-Decade Global Depression

Looks like Duncun fell for the Broken Window Fallacy (aka The Seen and Unseen).   The FED has essentially stolen vast quantities of money from productive savers then levered that up with vast printed money.   Sound familiar?   The USA having the world's reserve currency has twin interrelated threats of foreigners bailing to AIIS and native inflation at home as citizens spend unwanted money.   

I agree with the explanation of why we are where we are but the suggestions seem unbelievable naiive.
Because interest rates are zero does not mean borrowing newly printed money to invest has no cost. The money spent will not represent money saved, and so when spent will affect the value of money in the economy compared to what it otherwise would have been. I think there is this faulty premise that as long as inflation is near zero, printing money has no cost but of course it does as it affects the value of money from what it otherwise would have been. 

The idea that the Fed shouldnt spend 85bn a month and instead give it to the government to invest in clever ideas that will become enormously profitable implies that the government can spot a way to invest that the private sector cant. Does anyone believe that? I hear the rebuttal that the Americans sent a man to the moon when they put their mind to it which is supposed to be proof that government can allocate capital well but that wasnt a business or invention. If you gave me a direct draw on the US taxpayer and asked me to build a 1000 storey building I suspect that in the end Id be able to but to think that means that with enough money you could discover profitable energy supply is not an iterative engineering project. If it was that easy, rather than spending 10s of billions on daft apps wouldnt Elon Musk characters have done this already?

 

I got the strong impression that Mr. Dincan has something to gain in the biotech industries. He was just pushing that too hard.
A cure for cancer?  Fat chance!  There's no money in curing cancer!

Borrow more money so government can spend it wisely?  We all know that government does not pick winners, it picks friends!

Has Mr. Duncan watched the Crash Course?  I don't think so.

 

Prax:  that's if you still believe we went to the moon!

Chris,

Please schedule Mr. Krugman for an interview.  This way the true solution to exponential problem can be identified.

Spend more money, tax only the rich people, pretend and pray to push the problem to the next election cycle, while printing infinite amount of money.

I was on a long drive, I could have arrived calmed and relaxed listening to music instead of wanting to smash my phone to pieces…

Spending up big on research is not going to get results any faster. The present system of venture capital distribution works well because the venture capitalists have very tough hurdles to negotiate. Many research scientists spend a month of every year applying for research grants, mostly from government. Open the spigots and what do you think will happen? There will be a lot more "scientists" applying for research grants, including the apocryphal rickshaw driver with a university degree. Perhaps that is an exaggeration but the sort of money that Chris and Richard are talking about would require way more laboratory infrastructure and research scientists. When that sort of demand is there sense generally goes out the window. The cost of facilities and labour would escalate. They spend more and so even more of this "money" from thin air ends up buying endless heaps of  consumer crap as it spreads through the economy…
Even worse, these huge injections of "money" from nothing completely distort our ability to put a value on anything. The process of discovery that a well functioning market implies no longer exists.

I am surprised by Chris supporting these crazy ideas. He has done so much good over the last few years with Crash Course and bringing some amazing minds to the microphone. I am just flabbergasted that he could be seriously suggesting such proposals. Or is he playing Devil's advocate?

The idea that a depression would be the best (or least worst) solution does not seem to be up for discussion. Looking back over history there has never been a time when the boom was not followed by the bust. The idea that there is a way out of the financial and cultural cul-de-sac that we are in is just another example of the hubris that a ruling elite displays towards the end of a period when much has been achieved. We humans may be brilliantly rational in the lab but socially we herd. The signs of rampant optimism are everywhere. The suggestions in the interview between Chris and Richard are an example. We can have our cake and eat it.

Despite the bravado, I sense a huge underlying unease. On the one hand you have normally sensible commentators refusing to even discuss how a depression could be managed in a way that spread the burden and the hardship. On the other hand, you have those who are mainly responsible for the trap we are in, the Fed and other central banks, beginning to show clear signs of doubt about the benefits of their largesse.

It may be taking longer than the course of events in the 1930s but the same social wave is taking place. The "mistake" that the Fed made when it turned off the taps was not a mistake but something that could not be avoided. It was simply that fear took over - not just at the Fed but across the nation and the world. It is so easy to rationalize what happened afterwards and blame the Fed but it was actually people across all social strata who stopped spending, employing, investing, taking risks and enjoying themselves. It was primarily a social phenomenon rather than a financial one - as was the preceding decade of the 1920s.

This is the mistake that most economists make because they see the world in terms of numbers rather than humans and human behaviour. The work being done by Robert Prechter and his associates in the field of Socionomics (a Prechter term) is an area that Chris should be looking at. Why has he never interviewed Bob Prechter?

   "Simple, minimalist, local living is our only hope and if there is any truth in the businessman and the fisherman parable…"
  Indeed, it is, but it will take an unimaginable amount of time & energy to convince the elite 10% of this fact. 

The one absolute I've learned in more than fifty years' reading history is that we haven't a single example of a social class giving up even one privilege to save themselves.  Better to go down w/the ship than admit we were wrong in anything!

I enjoy Richard's way of thinking about things and his views on "creditism".  However, as a long-time financial engineer and lawyer, I have to disagree about QE being debt cancellation.  It is true that INTEREST is recycled in the way discussed from the Treasury to the Fed and back so long as the Fed holds the debt on its balance sheet.  However, the principal of the debt remains and is not cancelled.  The average maturity of U.S. debt is about 5 years last I checked.  When the debt on the Fed's balance sheet comes due, then either the Treasury has to issue debt into the market at that time or the Fed has to monetize again.  Either way, the U.S. is stuck with the principal of the debt, faces unknown future market conditions to roll over that debt, or the Fed must continue to monetize that debt on rollover.  Also, Richard's analysis ignores political and economic effects that result from the Fed's monetization, namely the political opportunity to avoid making hard political decisions that need making and the ability to issue debt for useless things like war, arms for Ukraine, and both consumption and fraud driven by government programs.  Finally, his analysis seems to gloss over the currency destructive effects of QE, a serious cost not considered in his "debt cancellation = QE" paradigm.

I must compliment commenter csul, Apr.5, thank you. Not only the parable of the fisherman, but the news item about urbanization in China. This is, I believe a precursor to a world wide compulsory urbanization that is in the works, under the bland names of "Agenda 21" and "Rewilding". A multi decade depression is not a necessary consequence of the decades of overspending. I believe those decades were not a peculiarity of all the nations to devalue their money, as if due to some quirk of human nature. I believe it was PLANNED. Some elite thinkers, working on a Fabian evolution timescale decided to eliminate money based economies and replace them with so called resource based economies, with particular emphasis on the energy resources. This plan was likely born in the TECHNOCRACY movement, which has been co-opted by the Trilateral Commission, which is actively transforming the world to this new international economic order. So far it has been promoted clandestinely (like a Trojan Horse) within business, political, and religious institutions, per investigating author Patrick Wood. So instead of a long depression like an uber 30's setback, we could see a quick shift to a military controlled police state, with new technologies and social arrangements implemented by force. The new scenario is intended to give the elites absolute power over the masses, a return to ye olde regime of royal and noble classes over the mass rabble of hard-scrabble serfs. The new priesthood will be the techno-engineers, who will run the show, via computers, pervasive surveillance, robots, and BIG DATA. Money (including gold) will be obsolete (except on the black markets), and probably outlawed.
Here is another unpalatable item the elites want silenced … they want you to believe there is a danger of overpopulation. It's only a danger to the elites, not to the commoners.  https://www.youtube.com/watch?v=WT_CxJfFgh0
The argument that energy will hit a peak is another myth.  http://en.wikipedia.org/wiki/Thorium-based_nuclear_power  (+ many more)
another widely hyped myth, search for                      global warming hoax
see also       https://www.thevenusproject.com/en/            a sales pitch for resource based society
http://ericpetersautos.com/2015/03/11/tax-per-mile-cometh/   a warning about master control
The Internet of Things is a featured component of the Technetronic NWO. With central control of all electronic devices, the access to our things will be in the control of the elites… puppet strings on everything electronic, including your debit card, maybe even the key to your door.
These are not mere idle speculations on the future. This is coming, like it or not. (I don't.)

Essentially, the Fed might at some point own 100% of the Treasury bonds, which in its consequence is nothing more than the Treasury printing currency directly. If Richard can't see how this could go wrong, I'm not sure I can offer any help.
The dream of inventing ourselves out of the debt hole we have dug is nice, but doesn't have a great chance of happening. If governments were good at using printed currency to increase standards of living and productivity, we wouldn't have seen the repeated runaway inflation episodes in history.

Some good points in that presentation and yes I accept that population is in decline and the reasons for it; that the world could theoretically sustain even more people than it does now.  The documentary begs the question: should we really be worried about over population? 
I think the answer is still yes.   Because the point missed by the "documentary" is that currently quality of life is declining.  It is the quality that is unsustainable by the addition of more people or maintaining the current numbers.

And by quality I mean things like: ocean acidification, pollution, plastic poisoning, land destruction, over farming, pesticide poisoning, energy waste, nutrition, carcinogens, transportation snarls, lack of space, reduced peace-and-quiet, lack of money, wealth disparity and crony capitalism.  These are all on the rise and therefore reduce the quality of life. 

A reduction in the quality of life therefore means more people will only make it worse and less people is more likely to make it better by reversing many of the side-effects in that list above.  Trying to micro-manage the thousand interrelated reasons for the declining quality of life is just not practical.

I don't think it is realistic to think we can change human behavior and culture enough to make the arguments for continued population growth work.  Making everyone share more efficiently and play better together is simply not realistic and defies human nature. 

So the argument for population control goes like this.  What one thing can we change of our errant human behavior that might save the planet from self-destruction and the answer is birth-control.  There really is a balance point where humans can continue to mine oil and farm the land and seas that doesn't require fracking, pesticides, industrial fertilizers, GMO's and super-trawlers.  Sadly we appear to have passed that point a long time ago.   We've been polluting the seas and destroying species for decades, even centuries. 

We really should have waited for the sustainable technology or behavior first then grown the population not the other way round.

Either argument however (for or against population growth) expects that we can change human behavior and culture in order to preserve or improve the quality of life.  I personally think focusing on population control is the easier self-correcting option.  Expecting companies, governments and whole populations to go green, conserve and preserve so that some of us can produce 8 children but all of us has 5 acres of land, an electric car, heat in the winter, cheap medicine and organic food on the table is never going to work out.  People just aren't that sophisticated and there will always be poor and rich, cheats and saints. 

The average behavior will always be that men shit on their food unless you give them an enormous amount of space.  So increase the space, don't bother trying to reprogram the man.